Which of the following transaction will affect the current ratio ?

Correct option is C

The correct answer is (c) Purchased goods on credit

Explanation:
• Current Ratio = Current Assets / Current Liabilities
• When goods are purchased on credit, Current Assets (Stock) increase, and Current Liabilities (Creditors) also increase.
• The effect on the ratio depends on the proportionate change, but it definitely affects the current ratio.
• Other options involve non-current items and hence do not impact the current ratio.

Information Booster:
• Ideal Current Ratio = 2 : 1 (indicates sound short-term solvency).
• Increase in Current Assets → improves liquidity position.
• Increase in Current Liabilities → reduces liquidity.
• Transactions involving only non-current items (like machinery, debentures, or shares) do not affect the current ratio.
• The ratio measures the company’s ability to pay short-term obligations.